In recent news, Coinbase has been striving to attain clear digital asset regulations from the United States Securities and Exchange Commission (SEC) for over a year. With a $1 trillion industry hanging in the balance, there’s a growing frustration among companies subject to US securities laws, with a lack of regulatory clarity cited as a primary concern.
The SEC, on the other hand, has been criticized by the Crypto Council for engaging in “regulation-by-enforcement.” This opaque approach allegedly hampers meaningful participation, prevents market players from discerning acceptable behaviors, and stifles investment and development in digital assets. This raises the question of whether the US’ hesitation or inability to supply regulatory clarity for digital assets is pushing crypto innovation overseas.
As regulatory clarity remains elusive, some businesses are indeed being driven away from the US. This is in stark contrast to other jurisdictions, such as the European Union, Switzerland, Singapore, the United Kingdom, Japan, and the Caymans, which have all provided clearer guidance for operating as a digital asset company. The EU, for example, has established a well-defined framework that differentiates between payment, security, and utility tokens. This step has created legal certainty and is expected to attract more industry startups to the region.
Moreover, the EU system allows for a token to be reclassified over time, reflecting the evolving nature of blockchain-based tokens. With the current state of affairs, the question remains whether US regulators can learn from their European counterparts and introduce new legislation for the cryptocurrency market.
Although comprehensive legislation for crypto assets in the US may be a long time coming, more targeted legislation, like spot market regulations, stablecoin legislation, or carve-outs for tax code, could be a more likely near-term development.
In the meantime, the US is perceived as out of step with the international financial regulatory community. While the country could maintain this position, the longer the industry incubates in other nations, the harder it will be for the US to regain ground lost due to regulatory uncertainty. The lack of clear regulations may stifle the development of the crypto market in the US while promoting innovation and investment in more regulatory-friendly jurisdictions.